Banking industry leaders maintained their growth outlook on the banking system in the next two years based on the results of the Banking Sector Outlook Survey released over the weekend.
The Bangko Sentral ng Pilipinas said expectations of double-digit growth in assets, loans, deposits and net income and the general improvement in the banks’ asset and loan quality indicators supported this level of optimism.
“Philippine banks likewise plan to maintain risk-based capital, leverage and liquidity ratios at levels higher than domestic and global standards to support expansion in their operations and promote institutional stability,” it said.
Data, however, showed that bank lending slightly slowed in February 2023 in the face of rising interest rates and higher inflation.
Outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, grew by 10 percent year-on-year in February, slower than 10.4 percent in January. On a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs, eased slightly by 0.2 percent.
Outstanding loans to residents, net of RRPs, increased by 9.9 percent in February, slower than the 10.2-percent rise in January.
Outstanding loans for production activities expanded by 8.7 percent in February, slower than 9.2 percent in January. This was driven by the growth in credit to key sectors, including financial and insurance activities (12.5 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (9.2 percent); electricity, gas, steam and air-conditioning supply (9.3 percent); information and communication (18.6 percent); manufacturing (8.3 percent); and real estate activities (3.8 percent).
Consumer loans to residents rose 21.2 percent in February, up from 20.3 percent in the previous month with the sustained growth in credit card and salary-based general purpose consumption loans.
Outstanding loans to non-residents went up by 14.8 percent in February, following a 16.8-percent growth rate in January.
Peliminary data also showed that domestic liquidity (M3) grew by 6.0 percent year-on-year to about P16.1 trillion in February, from the 5.6-percent revised growth in January. On a month-on-month seasonally-adjusted basis, M3 increased by about 0.8 percent.
The BSP said the sustained credit and ample liquidity would continue to support robust domestic demand.
“Even as the Philippine banking system remains sound, the BSP will keep a watchful eye over evolving market conditions to ensure that credit and liquidity dynamics continue to be in line with its price and financial stability mandates,” the BSP said.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the February bank lending growth was the slowest in 11 months, or since March 2022.
Ricafort said the slowdown was, mathematically, in view of some normalization of the base/denominator from lower base effects after some pockets of lockdowns earlier in 2021, with no more large-scale lockdown in 2022.
“The slower bank loans growth [was] also partly due to the rising trend in US global/local interest rates in recent months, as well as higher prices/inflation; thereby leading to higher borrowing/financing costs for consumers, businesses/industries, and other institutions that, in turn, partly slowed down the demand for loans/credit, as many central banks worldwide and locally battled elevated inflation,” Ricafort said.